Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s provision for income taxes consists of the following for the years ended December 31, 2022 and 2021:

	2022		2021
Current income tax provision:
Federal	$	—	$	—
State	—		—
Total	—		—
Deferred income tax benefit:
Federal	12,339,546		10,606,627
State	(7,370,113)		3,291,842
Total	4,969,433		13,898,469
Change in valuation allowance	(4,969,433)		(13,898,469)
Total provision (benefit) for income taxes	$	—	$	—

A reconciliation of the statutory U.S. income tax rate to the effective income tax rate as of December 31, 2022 and 2021 is as follows:

	2022		2021
U.S. Federal statutory rate	21.00	%	21.00	%
State taxes	0.17	%	6.52	%
Permanent differences	(0.58)	%	(0.13)	%
Other adjustments	(0.02)	%	0.02	%
Change in state tax rate	(12.61)	%	—	%
Change in valuation allowance	(7.96)	%	(27.41)	%
Provision for income taxes	0.00	%	0.00	%

The significant components of the Company’s deferred tax assets (liabilities) as of December 31, 2022 and 2021 were as follows:

	2022		2021
Deferred tax assets:
Net operating loss carryforward	$	28,477,866	$	31,758,878
Accrued compensation	575,883		701,576
Stock compensation	1,913,771		1,445,296
Research and development credits	291,022		291,022
Capitalized research and development costs	7,838,512		—
Operating leases	216,925		—
Other	2,022		52,751
Gross deferred income tax assets	39,316,001		34,249,523
Less: Valuation allowance	(38,857,468)		(33,886,096)
Total deferred income tax assets	458,533		363,427
Deferred tax liabilities:
ROU assets	(204,694)		—
Depreciation and amortization	(253,839)		(363,427)
Total deferred tax liabilities	(458,533)		(363,427)
Net deferred tax assets	$	—	$	—

At December 31, 2022 and 2021, the Company had net operating loss (NOL) carryforwards for income tax purposes of approximately $135.2 million and $115.4 million, respectively, which are available to offset future federal taxable income, if any. Approximately $10.5 million of the federal NOL was generated prior to 2018 and will be expiring in increments through 2037 beginning in 2035, while the remaining $124.7 million will be carried forward indefinitely. The state NOL will expire in increments through 2037, beginning in 2035. The federal research and development tax credit carryforwards, if not utilized, will expire beginning in 2037.

Section 382 of the Internal Revenue Code imposes substantial restrictions on the utilization of net operating losses and Section 383 of the Internal Revenue Code imposes restrictions on the utilization of tax credits in the event of a corporations’ ownership change. The Company believes that the future use of net operating losses and tax credits presented above may be limited as a result of past ownership changes and a formal study has not yet been completed.

The Company recognizes the effect of income tax positions only if those positions more likely than not of being sustained. At December 31, 2022, the Company had no gross unrecognized tax benefits and did not recognize any interest or penalties related to uncertain tax positions.

At December 31, 2022, the Company provided a 100% valuation allowance on its net deferred tax assets because realization of any future tax benefit cannot be reasonably assured. The Company’s valuation allowance increased due to the pre-tax losses generated in the current year.

The Company is subject to income taxation by both federal and state taxing authorities. Income tax returns for the years ended December 31, 2021, 2020, and 2019 are open to audit by federal and state taxing authorities.

Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for US Tax purposes over five or fifteen years effective January 1, 2022. The mandatory capitalization requirement increased our deferred tax assets as of December 31, 2022.